In Case You Missed It: Our Underwater Jobs Economy

In this week’s issue, we have thinking from Alan Greenspan on why he missed the 2008 crisis and the “economic machine,” the confusion over corporate social responsibility, and how low wages and a shrinking job market harm the economy.

Must reads of the week: In Foreign Affairs, former Fed Chair Alan Greenspan discusses why he and other economists missed foreseeing the 2008 financial crisis. The NYT's Dealbook blog features a 30-minute video primer from hedge fund founder Ray Dalio on what he calls the economic machine. The Center for American Progress has a new report on diversity, which explores policies to ensure "that all people are in a position to contribute to and benefit from economic growth." In general, folks should check out the site Remapping the Debate for great stories on the economy like this one on why retirees don't spend and how stimulative it would be if they did.

The Low Wage, Low Job Scale

Sadly, the reopened government issued a September jobs reports that was as lack-luster as ever, according to USAToday's Tim Mullany, who notes that one driver is the contraction of government jobs. The jobs numbers for October could look a lot worse depending on how the furloughed workers are counted, says New York Times Catherine Rampell. Let’s look at this check from the NYT's Economix blog on job stagnation:

Job growth continued to keep pace with population growth in September, leaving the share of Americans with jobs stuck at 58.6 percent, basically the same low level this “employment rate” has maintained since September 2009. Before the recession, about 63 in 100 American adults had jobs. Now, fewer than 59.

There are eight metro areas that boast more mid-level jobs today than in 2007. The list is dominated by Texas cities, led by Austin-Round Rock-San Marcos, which has added 17,000 mid-skill jobs — an increase of 7.6% – among the 95,000 new jobs generated in the region. The largest numeric increase is in Houston-Sugarland-Baytown, which has 60,810 more mid-skilled jobs, up 7.4%. The Houston metro area also has easily led the nation in overall job growth since 2007, adding a net 280,000 positions… The working class and the endangered middle class may be favored topics of discussion in the deepest blue regions, but for the most part these metro areas have failed to bolster their middle-skilled labor forces.

Check out this infographic from the Social Work Degree Center attempting to end the way the working poor are romanticized in popular culture. Meanwhile, this report from the Center for Economic Policy Research takes on black male unemployment, check out this chart:

Government benefits may create incentives to work less, but that seems to be a worthwhile trade-off, even at the expense of taxpayers, to ensure that the most vulnerable members of society are protected. Programs like EITC are successful because they encourage work, but still redistribute income to the most needy—the high take-up rates among fast food workers show the benefit is working as it should. American workers need more middle-income jobs, but simply having employers pay middle class wages for low-skill and part-time jobs isn’t the answer. The lack of middle-income jobs reflects deeper trends such as globalization and technology. Restoring a vibrant middle class workforce requires taking on harder issues like education and mobility.

With the average worker's productivity up by 80% since the 1970s but pay essentially flat, the broad American middle class can no longer buy what it produces, unless it borrows heavily. Households at the top, with far lower propensities to consume, come nowhere close to replacing the demand despite receiving the lion's share of the pay hikes. The amount of demand drained from the economy by the preponderance of low pay levels amounted to up to $1 trillion annually in the 2000s and contributed mightily to the Great Recession.

Business Unusual

CFR's Edward Alden discusses the ways in which American business, which gave massive amounts of political money to folks who almost defaulted on the debt, is fighting against its own interests:

The problem is part of a larger one that professors at the Harvard Business School have identified as a failure by American business to protect the “commons” that are vital for its own profitability. Investing in workplace training, nurturing local suppliers, and spending on research are all costly activities, and many companies are loathe to pay the up-front costs on the uncertain promise of future gains. It is easier to search for quick cost savings. But if every company behaves the same way, the United States becomes a less attractive place to invest, to the collective cost of both business and the larger society. A federal government that can be relied on to pay its debts is one of those things that is rather essential to a well-functioning “commons.”

The results of the world's largest CEO sustainability study make bleak reading with strong evidence that the journey towards business transformation has ground to a halt. The survey, released to coincide with the United Nations Global Compact (UNGC) leaders summit in New York, shows that despite the recognition the world is in grave danger, business leaders do not believe the conditions are in place for them to meet the challenge. CEOs admit they are still struggling to make the business case for long-term investments, while key influencers such as consumers, governments and investors are failing to provide the incentives. For example, just one third of those running public companies believe their share price currently includes value directly attributable to sustainability initiatives and performance.

As the panel discussion came to an end, the moderator surveyed the room to see who believes corporations should do just shared value giving, and who believe just corporate philanthropic giving. Most in the room, like me, believe that we need both. U.S. companies are increasingly interested in quantifying the business benefits generated by being socially responsible. Measuring the return on investments through shared value initiatives can be very easily done. Yet, corporations should view their shared value initiatives as only one piece of their overall social responsibility. Philanthropy cannot just be an incubator for understanding both community and corporate needs.

Activist Carl Icahn has started a new web site aimed uniting shareholders to fight "for real corporate democracy." Is globalization in trouble? Check out this online debate at the Economist discussing just that.

Skills Gap

A few years ago, Stan Litow, the former vice chancellor of the New York City Schools, joined IBM and began working on a solution for what the company believed was its biggest long-term economic challenge — the skills gap. IBM could find plenty of PhDs, and plenty of lower level workers in both the US and abroad, but it didn’t have the people to do the millions of jobs in the middle — entry level software engineers, marketing executives, sales force, even skilled assistants. Training the middle-income workforce of the future is the core of the P-Tech model. Aside from exponentially beefing up the science and tech curriculum, P-Tech schools do something even more radical — they turn 4 year high school into 6 year high school, in which students not only graduate with an associates degree, but are guaranteed a job with IBM.

Bloomberg's Clive Crooks also discusses what the skills gap means for U.S. prosperity:

One wonders how many U.S. political leaders have even bothered to look at an authoritative new survey that says the U.S. is failing -- and failing abjectly -- in an area of policy that is crucial for prosperity. The Organization for Economic Cooperation and Development has just published the first results from an exhaustive international survey of skills. It’s the most authoritative project of its kind -- a huge undertaking, comparing adults’ proficiency in literacy, numeracy and problem-solving across the organization’s member countries. In effect, the survey measures the quality of human capital, one of the crucial drivers of long-term economic success. The U.S. performance in these rankings isn’t just poor, it’s pitiful.

Data Bits

The study found that 40 percent of advisers believed that their wealthy clients would reduce their giving if the estate tax were eliminated and that 78 percent predicted a decline if income-tax deductions for donations were eliminated.

Yet the wealthy individuals in the study, who had $3-million or more in investable assets and were active givers, overwhelmingly said they would not reduce their giving if those tax policies changed. This opinion piece in the Buffalo News discusses the development of Buffalo Niagara Medical Campus, a Heron grantee, and efforts to revitalize the city's downtown. Guidestar and the Foundation Center are forming a data alliance reports Nonprofit Quarterly. The Urban Institute has a new report on fundraising effectiveness that may also be of interest. And finally CGI Federal, the geniuses behind the healthcare law digital debacle, is also in a fight with HUD over their Section 8 contract, reports Wonkblog.

Click here for more issues of “In Case You Missed It”, our weekly news digest featuring the best thinking on the economy, poverty, inequality and investing, or subscribe to the email.

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Author

Toni Johnson, Vice President, Knowledge & Influence

Toni Johnson joined Heron in January of 2013 and is tasked with designing and implementing the foundation’s long-term public influence and engagement strategy. She is a former deputy editor and staff writer for the Emmy-winning website of the Council on ...